A financial model review checklist starts with two tests: every assumption lives on one tab, and changing one input moves the whole model. After that, check that no numbers are typed into formulas, and that the model has the ramps, statements and charts an investor expects.
The founder had a seed round to close and a model he'd built himself. His company lends money and then sells the loans into a fund. He didn't want a big new model. He told us that would be overkill at seed. He wanted a sanity check, and he asked one plain question: what did I miss?
He was right that a seed model can be small. It still has to work when someone changes a number.
The model looked finished
The file had eight tabs. There was an assumptions tab, a monthly profit and loss, use of funds, unit economics, a sensitivity tab and three supporting cost tabs. The categories were right, and on a first read it looked done.
Then we traced each number back to where it came from. A lot of them didn't come from the assumptions tab at all.
Numbers typed straight into formulas
The monthly profit and loss had assumptions typed straight into its formulas. The share of loans expected to go unpaid was used in the revenue lines, but it was never written down on the assumptions tab. Some variable costs had no assumption behind them. Every hire had a start month and an end month typed in by hand.
That's normal in a model built fast. The trouble shows up later. When the founder changes an assumption, the model only updates the cells that point to it. The typed-in numbers stay where they are. The output still looks fine, and it's wrong.
Tabs that worked alone
The second problem was bigger. The marketing budget tab and the marketing spend on the assumptions tab weren't linked. Variable costs didn't flow into use of funds or unit economics.
The sensitivity tab had its own typed-in values, and they didn't match the assumptions tab. It said the value of the collateral behind each loan moved the results. That input wasn't connected to anything, so it didn't. The customer lifetime value on that tab didn't match the base case on the unit economics tab either.
Use of funds had the same issue. Its timing was typed in by hand, so it couldn't show when the cash would actually go out. A cash figure with no timing behind it is hard for an investor to read.
The parts that were missing
Lending started at full capacity in the month it switched on. That's unrealistic. A new lender builds up over several months, and the model needed a ramp.
The fund had no financial statements of its own. If the loans are sold into a fund, it should have its own balance sheet and cash flow, and it should show what its investors get back. We also asked who pays the per-loan costs once a loan is sold. The model didn't say.
There were no charts. We recommended six, starting with a cash flow waterfall and profit by month and in total.
What we sent back: the review checklist
- A tab-by-tab list of every typed-in number and broken link we found
- A short summary of the four problems in plain words: integrity, linkage, missing pieces and presentation
- Questions on how the fund should be set up and who carries the variable costs
- Six charts to add so the model can show its own story
Our advice was direct. Fix the model before it goes in front of an investor or gets used inside the company. Move every assumption onto one tab, point every other tab at it, and give the fund its own statements.
Why it matters for your raise
You can build a model with all the right tabs and still have a model that doesn't work. Investors often test a model by changing one input and watching what moves. If nothing moves, they stop trusting the rest of it.
The fix is small. Give every assumption one home, and make every tab read from it.
Before you send your model, put every assumption on one tab. Then change one input and check that the whole model moves with it.
Questions founders ask
How do I check my financial model before sending it to investors?
Put every assumption on one tab and make every other tab read from it. Look for numbers typed straight into formulas and move them to the assumptions tab. Then change one input, like price or a hire date, and check that revenue, costs, cash and charts all move. Last, check that cash timing shows month by month and that new revenue ramps up instead of starting at full speed.
How are the three financial statements linked?
Net profit from the income statement flows into retained earnings on the balance sheet, and it's also the first line of the cash flow statement. The cash flow statement adjusts for non-cash items and changes in working capital, and its closing cash becomes the cash line on the balance sheet. If the links are right, the balance sheet balances every month without a plug.
What should a seed stage financial model include?
A seed model can be small. It needs one assumptions tab, a monthly profit and loss, a cash view, use of funds with timing, unit economics and a few charts. If the business sells loans into a fund, like this one, the fund needs its own statements too. The real test is that changing one input moves everything, and that matters more than the number of tabs.